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Chartered AccountantsChartered Accountants

Furnished Holiday Property – Inheritance Tax

Historically HMRC accepted that in many cases furnished Holiday Lets qualifies for “Business Property Relief”, which exempted the property from IHT, meaning potential tax savings of 40% of the value of the property. The IHT relief was dependant on the degree of involvement of the owner in running the Furnished Holiday Let “business”. An owner who was simply a passive investor would not benefit from this relief, however one who was actively involved in the management of the business would.

More recently HMRC have changed their stance on this and unless the nature of services provided to holiday makers alongside the lettings is beyond that ordinarily required of a landlord a claim for Business Property Relief is unlikely to succeed.

This stance is supported by the ruling at the High Court in February 2013 that holiday lettings should normally be regarded as investments rather than businesses, consequently Business Property Relief will not be available and the properties will, in most cases, be subject to Inheritance Tax.

Are you a Holiday home owner wanting to know more about the likely inheritance tax implications of your Furnished Holiday Let, contact bb@moco.co.uk

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